Impac stops funding Alt-A mortgages

Company says it has met all margin calls; is selling $1 bln of mortgages

By

AlistairBarr

SAN FRANCISCO (MarketWatch) -- Impac Mortgage Holdings Inc. said on Tuesday that it has stopped funding so-called Alt-A mortgages, but has met all margin calls so far.

Impac
IMH, -3.65%
also said it has negotiated the sale of $1 billion of mortgages the company held using borrowed money. That's out of a total of $1.6 billion held on such financed facilities, the company noted.

Impac shares slumped 36% to $1.09 on Tuesday, before being halted. The stock has lost more than 85% of its value so far this year.

Impac said it stopped buying Alt-A mortgages because of volatility in the secondary home loan market and disruptions in the process that allows mortgage originators to sell off, or securitize, the loans they offer.

Alt-A loans were originally designed for borrowers with clean credit records, but with other issues that often meant they provided fewer documents or even no documents showing what they earned.

Delinquencies on Alt-A mortgages have risen this year as problems in the industry spread from the subprime part of the market. American Home Mortgage
AHMIQ
a large Alt-A lender, filed for bankruptcy this week and Standard & Poor's warned on Tuesday that it may downgrade 207 classes of Alt-A mortgage-backed securities.

Impac said on Tuesday that it will continue to fund loans that are eligible to be sold to government-sponsored agencies such as Fannie Mae
FNM, +1.38%
and Freddie Mac
FRE, +2.65%

The volume of mortgage originations has declined in recent months, so Impac said it has cut expenses by laying off employees.

"While this is a difficult and painful decision, we believe that it's a prudent strategy in light of the current business environment," Impac Chief Executive Joseph Tomkinson said in a statement. "These rapid changes are widespread in our industry and while we are continuing to assess the market daily and can not make any assurances, we believe that we are taking the right steps to preserve long term stockholder value."

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